Background
The Income Support law includes a provision for cold weather payments to be made to selected Income Support households during winter months. Payments are based on the temperature during each month between October and April and are paid automatically to households in the following categories:
- Household includes an adult aged 65 or above
- Household includes a child aged below three
- Household includes someone with high personal care needs
During the winter of 2010/2011, an eligible household received a total of £219.87
The value of the payments is adjusted each summer in line with the increase in fuel costs as measured in the June RPI. For the 2011 /2012 winter the base rate has been increased by 11.2%.
In February 2011, the States approved proposition P.4/2011 to extend cold weather payments under the Income Support law to Jersey pensioners with incomes above the Income Support level, but without an income tax liability. In September 2011, the 2012 Business Plan was approved which included funding for this scheme.
The Regulations that have been drafted do not precisely follow the original proposal to extend the cold weather payments within the Income Support law. The new benefit is specifically aimed at pensioners who do not qualify for Income Support but have no income tax liability and therefore the scheme has been drafted as stand-alone regulations, closely connected to the Food Costs Bonus Regulations.
Potential Cold Weather Bonus Recipients
Pensioner tenants with an annual household income of up to £17,700 for a single pensioner (with savings of no more than £13,700) or £23,900 for a pensioner couple (with savings of up to £22,718) are eligible for Income Support, and are already entitled to cold weather payments. Households with incomes above these levels are liable for income tax and so there is no “gap” between Income Support and income tax for most pensioner tenants.
The level of Income Support benefit reduces as household savings increase, and tenant pensioners with more substantial savings may have an income below the income tax threshold although they do not qualify for Income Support. Some of these will qualify for the new Bonus. For example a single tenant pensioner with savings of £35,000 will only qualify for Income Support if their annual income is less than £13,265. In this particular example, a single pensioner with an income between £13,265 and £14,270[1] and savings of £35,000 would be covered by the new Bonus.
However, the great majority of pensioners tenants who do not pay income tax are already eligible for Income Support and will receive cold weather payments through Income Support directly. The majority of those pensioner tenants who are not eligible for Income Support are likely to have a liability to pay income tax and will not be covered by Income Support, nor by the proposed new regulations. Very few pensioner households living in tenanted accommodation will be eligible for the new Cold Weather Bonus. The great majority of potential claimants will be owner occupiers.
Gross Income Support rates for owner occupiers are lower as these households are not paying rent for their accommodation. A single pensioner, who owns a two bedroomed house and has savings of up to £13,700, will be eligible for Income Support if their income is less than £10,000 per annum. This new benefit will be available to those with incomes between £10,000 per annum and £14,270 per annum, at which point income tax becomes payable. For couples, Income Support is available at incomes of up to £16,000 with income tax liability starting at £23,480.
These figures are given as examples only as individual Income Support entitlement depends on a range of factors. In particular, individuals with disabilities receive higher Income Support rates. The relationship between income tax thresholds and Income Support levels will be examined closely over the next 12 months as part of the ongoing review of Income Support.
Home Insulation
It is very likely that there will be a continuing upward pressure on energy prices in coming years and it is well established that the proportion of the population in Jersey aged over pension age will increase steadily over the next 2 to 3 decades. These two trends will combine to create substantial annual increases in the cost of any cash benefit provided in respect of heating costs for older households.
Concerns have been raised that many homes in Jersey are still not energy efficient and I will discuss with the Minister for the Environment a scheme in which the Cold Weather Bonus cash payments are only available on a time limited basis and are linked to households agreeing to have free insulation installed through the Energy Efficiency Scheme provided by the Environment Department. This would have the joint benefits of restricting the growth in the future costs of the Cold Weather Bonus payments and improving the thermal efficiency of the homes of elderly islanders.
Draft Regulations
The draft regulations provide a Cold Weather Bonus to pensioner households that are also eligible for the Food Costs Bonus.
The main eligibility criteria for the Food Costs Bonus is that a member of household has lived in Jersey for the last five years, and that the household does not currently receive Income Support and did not have any income tax liability in the previous year.
The main additional criterion to receive the Cold Weather Bonus is that the household must include an adult who is aged 65 or above and is receiving a Jersey old-age pension.
The Cold Weather Bonus will be calculated on the same basis as the cold weather payments made under Income Support. The bonus will be paid twice a year, once in January in respect of the months October to December, and then in May in respect of January to April.
In 2012, households who received a Food Costs Bonus in 2011 will be eligible to apply for the Cold Weather Bonus for January to April 2012. After May 2012 applicants will be encouraged to apply for the Food Costs Bonus and the Cold Weather Bonus at the same time and eligibility will last for up to 12 months. This will minimize the amount of administration from the point of view of both the claimant and the Department.
Applications, decisions and appeals in respect of the Cold Weather Bonus will be dealt with in the same way as the Food Costs Bonus and penalties in respect of any breach of the regulations are also aligned with those under the Food Costs Bonus regulations.
Financial and manpower considerations
The base value for the Income Support cold weather payments has increased by 11.2% for the 2011/2012 winter period, in line with the annual increase of the fuel and light component of the Jersey RPI.
The Cold Weather Bonus will be paid at the same value as the cold weather payment and the actual value will depend on the temperature each month over the winter. Based on temperatures for the last two years, the total value of the bonus per household is likely to be approximately £255.
The number of pensioners applying for the Food Costs Bonus in 2011 was approximately 1,000. All pensioner households in Jersey were sent a leaflet of benefit information in September and this has led to some increase in the take-up of the TV licence benefit, the 65+ health scheme and the Food Costs Bonus.
However, the addition of the Cold Weather Bonus may encourage additional take-up by pensioners and a budget based on 1,100 claimants would suggest a total benefit cost of £280,500 in 2012. This sum, plus administration costs, is provided for in the departmental cash limit.
It is estimated that the development costs for the new benefit will be up to £50,000 and this figure will be requested to be carried forward to 2012 from the Social Security Department's forecast underspend in respect of the 2011 departmental cash limit. The additional manpower for this benefit will be absorbed within the existing headcount for the Department.
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